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The proposed amendments would strengthen existing transfer agent compliance, risk management, and safeguarding standards; permit the use of distributed ledger technology for recordkeeping; and introduce certain new gatekeeper obligations.

By Jenny Cieplak, Paul M. Dudek, Zachary Fallon, Dan Gibbons, Robert A. Koenig, Elisabeth M. Martin, Stephen P. Wink, Naim Culhaci, Dylan H. Lojac, and Deric Behar

Key Points:

  • The Proposal would revise transfer agent rules regarding registration, annual reporting, turnaround and processing standards, recordkeeping, risk management, and restrictive legends, while providing a modernized framework for transfer agents to leverage electronic and blockchain-based recordkeeping.
  • Notably, proposed Rule 17ad-31 would create a regulatory gatekeeping obligation for transfer agents tied to Section 5 of the Securities Act, requiring them to form their own reasonable basis before processing unregistered transactions.
  • The Proposal would transform the transfer agent framework from a largely ministerial recordkeeping and processing regime into a substantially more regulated one.

On September 1, 2026, the Securities and Exchange Commission (SEC or Commission) proposed to modernize the registration and recordkeeping rules that apply to registered transfer agents (the Proposal) and allow agents to use distributed ledger technology (DLT or blockchain) for tracking securities ownership.

Background

Most of the core transfer agent rules date to the late 1970s and early 1980s, when securities were represented by physical certificates, and the Proposal represents the first comprehensive revision since then. The Proposal attempts to better address a broader and more technologically advanced range of functions, services, processes, and operations that transfer agents now perform. In doing so, the Proposal updates various technological references, tightens and augments existing timeframe and certain other requirements, and introduces certain new regulatory obligations. As discussed below, in relation to certain of the new obligations that are being proposed, commenters may ask whether they reach ancillary activities that registered transfer agents would perform simply as agents of issuers generally, rather than activities they perform as transfer agents within the meaning of Section 3(a)(25) of the Securities Exchange Act of 1934 (the Exchange Act).

Transfer Agents

Registered transfer agents are the third-party financial institutions hired by issuers to serve as the official bookkeepers of a company’s share ownership. They are primarily responsible for maintaining the master securityholder file (the official record of ownership of an issuer’s securities) including by monitoring it for over-issuance, promptly and accurately processing securities transfers, and distributing cash or stock dividends, bond principal and interest, and mutual fund redemptions. As a core component of financial market infrastructure, they ensure accurate ownership records, prevent the over-issuance of shares, and maintain the integrity of clearing and settlement processes.

According to the SEC, as of June 30, 2026, there were approximately 327 registered transfer agents subject to the Proposal.

Tokenization

“Tokenization” refers to the concept of recording ownership rights in real-world assets like stock or real estate through the use of digital tokens on a blockchain. This does not change the characterization of the underlying asset, and it does not necessarily create a new asset — it simply changes the way records are maintained. The Proposal acknowledges that many transfer agents already use blockchain-based tokens as a recordkeeping mechanism, but have been required to maintain parallel master securityholder files through other technological means due to the current restrictions in the rules.1

The Proposal

Key provisions of the Proposal are as follows:

Use of Blockchain

The Proposal would update legacy rules to clearly accommodate the use of electronic and blockchain-based recordkeeping. Specifically, the Proposal “would permit a transfer agent to utilize a blockchain or other distributed ledger technology as its master securityholder file, or a component thereof, but it would not mandate it.”

Revisions to Registration and Annual Reporting Requirements

The Proposal would revise the registration and annual reporting framework both to give the SEC more time to review new entrants and to require more detailed operational disclosures.

  • The Proposal would align the registration window under Rule 17ac2-1 with the statutory default 45-day period enacted by Congress in Section 17A(c)(2) of the Exchange Act, replacing the existing shortened 30-day timeframe that had previously been adopted by the SEC. This alignment gives the SEC additional time to review new market entrants prior to effectiveness of the transfer agent’s registration.
  • Proposed revisions to Rule 17ac2-2 would expressly mandate that transfer agents file an amended Form TA-2 within 60 days of discovering that a previous annual report contained materially inaccurate, incomplete, or misleading information at the time of filing. While transfer agents may already choose to correct materially inaccurate TA-2 filings as a general matter of correcting disclosure, the proposed revisions would expressly mandate such amendments and impose a set 60-day timeframe post-discovery.
  • The SEC also proposes updating the specific questions and instructions on both Form TA-1 and Form TA-2 to require more descriptive operational disclosures. For example, new Form TA-2 questions would specifically require transfer agents to report the number of issues for which physical certificates remain in use, the number of issues for which the master securityholder file is maintained using distributed ledger technology, and the names of tokenization models and distributed ledger platforms utilized.

Augmenting Operational and Processing Standards

The Proposal would augment the applicable standards under various existing rules to because of the growing complexity of transfer agent activities and how technological advancements in electronic recordkeeping and communications have made it easier to comply with such augmented standards.

  • Proposed revisions to Rules 17ad-2 and 17ad-3 would replace the existing metrics-based requirement to “turn around” (i.e., complete transfer in relation to) at least 90% of routine “items” (i.e., instructions for transfer) within three business days. Instead, transfer agents would be required to establish, maintain, and enforce written policies and procedures reasonably designed to ensure the timely turnaround and processing of 100% of routine items in alignment with the modern accelerated settlement cycle: the shorter of one business day or the period specified by Rule 15c6-1(a), currently T+1. Because the standard is tied to Rule 15c6-1(a), any future shortening of the settlement cycle could automatically shorten transfer agents’ turnaround and posting deadlines without further rulemaking. The existing noon receipt cutoff would also be eliminated, so that an item received at any point during a business day would be treated as received that day. The performance threshold for avoiding activity expansion limitations would rise from 75% to 95%, a materially higher performance standard.
  • For recordkeeping, amendments to Rules 17ad-6 and 17ad-7 would lengthen the existing retention periods for most records by uniformly imposing a retention period of six years for all records. Currently, most records are subject to a two-year retention period, and the only types of records subject to a six-year retention period are canceled certificates. By way of contrast, while certain broker-dealer records — such as blotter, ledgers, and customer account records — are subject to a six-year retention period, others — such as communications — are subject to a three-year retention period. The Proposal would also modernize certain provisions governing the use of electronic systems and third-party storage vendors.
  • The timeline for posting to master securityholder files under Rule 17ad-10 would, in conjunction with the turnaround timeline described above, be shortened to the “shorter of one business day or period specified in Rule 15c6-1(a)” standard to match the modern settlement cycle. This would be a significant shortening of the current timeframes, which are within five business days for most transfer agents, ten business days for affiliated issuers using batch systems, and up to 30 calendar days for transfer agents exempt under Rule 17ad-4. The SEC emphasized that, for uncertificated securities (including tokenized securities), turnaround and posting will effectively be one and the same in any event. 
  • The definition of “item,” the basic unit for which the turnaround and other processing requirements apply, would be expanded to include instructions transmitted through “an electronic system controlled, operated, or enabled by the transfer agent,” which the SEC stated is intended to capture existing technologies, such as blockchain platforms and other distributed ledger technologies, as well as new technologies not yet developed.2
  • Proposed amendments to Rule 17ad-6 would also, for the first time, expressly require transfer agents to document in writing their service agreements with issuers, addressing SEC concerns about disputes arising from undocumented arrangements, particularly regarding termination conditions, fee disputes, and the disposition of securityholder records.

We note that the service-agreement requirement may take on added significance when considered together with proposed Rule 17ad-31, discussed below. Issuers may wish to address the transfer agent’s required documentation, review and escalation procedures, expected response times, responsibility for outside-counsel costs, treatment of disputed legend instructions, and obligations to cooperate in a transition to a successor transfer agent. Although contractual provisions would not eliminate the transfer agent’s regulatory duties, greater procedural specificity could reduce execution uncertainty.

Risk Management and Safeguarding Requirements

The Proposal would transform Rule 17ad-12 from a basic safeguarding requirement into a broader risk management rule. Transfer agents would be required to:

  • establish, maintain, and enforce written policies to protect custody assets and actively mitigate operational risks;
  • hold all issuer, securityholder, and other third-party funds in a bank account separate from any other bank account of the transfer agent (although client-by-client segregation would not be required), which the SEC stated is intended to prevent commingling and to keep those funds bankruptcy remote;
  • establish a business continuity plan addressing significant disruption risks that is tested annually; and
  • send not less than two written notifications to inactive securityholders (“by any method reasonably expected to reach the inactive securityholder” and no later than six months after the securityholder became an inactive securityholder) to help prevent escheatment of investor assets to state unclaimed property authorities.

The SEC does not expressly take a position on the question of whether a transfer agent can undertake the paying agent function without registering in some additional capacity. However, the heightened standard under Rule 17ad-12 introduces a heightened special reserve account obligation in connection with any such role. Notably for digital asset market participants, the SEC asks in its request for comment whether the proposed amendments to Rule 17ad-12 should address whether stablecoins and tokenized deposits can constitute “funds” in addition to cash, and whether the required separate bank account could be a bank’s custodial wallet.

Rescission of Rule 17ad-4

Under the Proposal, the SEC would rescind Rule 17ad-4, which currently provides exemptions from the turnaround, processing, and recordkeeping requirements for limited partnership securities, dividend reinvestment plans, redeemable securities of registered open-end investment companies, and certain small transfer agents based on volume thresholds. The SEC reasoned that technological advances have significantly improved operational capacity across transfer agents of all sizes, making these historical volume-based exemptions unnecessary. The SEC estimates that up to 194 transfer agents are currently covered by the exemption.

The Proposal may have a significant impact on transfer agents currently relying on such exemptions under Rule 17ad-4. An affected transfer agent would not simply become subject to the existing general rules; it would also become subject, at the same time, to the proposed accelerated Rule 17ad-2 standards, the revised Rule 17ad-3 performance thresholds, and the updated Rule 17ad-6 recordkeeping requirements, from which it would otherwise have been exempt under Rule 17ad-4.

New Compliance Rule 17ad-30

Proposed Rule 17ad-30 would require registered transfer agents to establish, maintain, and enforce written policies reasonably designed to achieve compliance with the federal securities laws and the rules and regulations thereunder applicable to transfer agents, including timely identification and remediation of instances of non-compliance with such policies. These requirements — whose structure parallels corresponding general compliance requirements imposed on broker-dealers by self-regulatory organizations — are designed to establish a uniform baseline compliance requirement for all registered transfer agents, while providing individual transfer agents the flexibility to develop and implement written policies and procedures based on their specific business models and other characteristics.

Section 5 Gatekeeping and Restrictive Legend Removal

Proposed Rule 17ad-31 would establish requirements for the placement and removal of restrictive legends,3 imposing a previously non-existent regulatory gatekeeping obligation for transfer agents in connection with unregistered securities transactions:

  • First, for each issue of securities it services, the proposed rule would require a transfer agent to obtain from the issuer and maintain a current list of issuer employees on whose instructions it is authorized to act regarding the placement and removal of restrictive legends, and to refrain from acting on instructions from anyone not on that list. The SEC noted that this new requirement is designed to address the fact that some promoters can represent themselves as agents of the issuer when they are not.
  • Most notably, the rule would also prohibit transfer agents from facilitating unregistered securities transactions unless they have a reasonable basis to believe the transaction does not violate, or is not part of a chain of transactions that would violate, Section 5(a) of the Securities Act of 1933 (the Securities Act), significantly expanding the role of transfer agents as gatekeepers. The proposed rule identifies three example transactions within scope: original issuances not registered under the Securities Act; requests to remove a restrictive legend or stop order on any security; and purchases, sales, or transfers of a security by an affiliate, officer, or director of the issuer of the security. For this purpose, the SEC stated that “transfer” includes non-sale transfers.

The Proposal includes a non-exclusive safe harbor in Rule 17ad-31(c) under which a transfer agent has two paths to establish that it met the “reasonable basis” standard:

  • Under the first path, prong (c)(2), the transfer agent could obtain a qualifying opinion of outside counsel. Among other conditions, the opinion must analyze the applicability and validity of a specific exemption from registration rather than simply state a conclusion that the transaction is exempt. Critically, counsel may not be an affiliate, officer, director, or employee of either the issuer or the individual or entity seeking to resell the shares. That condition would exclude an opinion delivered by an issuer’s in-house counsel, and equally an opinion from in-house counsel to an entity holder seeking to resell.
  • For the second path, prong (c)(3), a transfer agent could make its own determination that the transaction may be conducted pursuant to a specific exemption from registration, provided the determination is supported by written documentation, reviewed and approved by management of the transfer agent, with similar substantive requirements as would be applicable to a proper outside counsel opinion. Despite the independence requirement in (c)(2), nothing restricts transfer agents from treating an issuer’s in-house opinion as part of the documentary record supporting its own determination under (c)(3).4

Neither approach would permit blind reliance. In either case, the transfer agent would be required to not be aware of circumstances indicating that the transaction may violate Section 5(a), and the SEC stated that transfer agents should investigate and resolve “red flags” before proceeding. The Proposal identifies examples of red flags in connection with unregistered transactions, including trading suspensions, concentration of ownership, incomplete SEC filings, sudden demand for thinly traded securities, or other suspicious indications.

Independence Condition for Opinions of Counsel

The independence condition in prong (c)(2) is likely to draw significant attention from market participants. Nothing in the text of proposed Rule 17ad-31 would prohibit a transfer agent from forming a reasonable basis in reliance on an in-house counsel opinion outside the non-exclusive safe harbor. The preamble, however, states that the condition “is designed to help ensure the independence and objectivity of the legal analysis.” Transfer agents reading that language may reasonably infer that the SEC has questioned the reliability of in-house legend removal opinions.

That dynamic is familiar. The non-exclusive safe harbor for taking “reasonable steps to verify” accredited investor status under Rule 506(c) of Regulation D is one of several instances in which market participants have converged on the enumerated methods to the practical exclusion of the general standard those methods were meant to illustrate. The incentives here point the same way: The transfer agent would become responsible for confirming there is a reasonable basis that a transaction does not violate Section 5, and the SEC itself asks whether Rule 17ad-31 would give rise to incremental liability and litigation costs notwithstanding the flexibility to obtain an opinion of counsel. A transfer agent weighing that exposure has limited incentive to operate outside a defined safe harbor, and prong (c)(2) may become the de facto standard whether or not the rule requires it, which may introduce meaningful friction into secondary transfers of restricted securities, tokenized or otherwise.

The potential impact is not limited to secondary resales or post-closing legend removal requests, either. Because the proposed rule expressly reaches original issuances not registered under the Securities Act, it could affect the closing mechanics for a wide range of private capital markets transactions. Transfer agents may require a complete exemption analysis, supporting representations, and other documentary evidence before issuing restricted securities, even where issuer’s counsel and the transaction parties have already concluded that the offering is exempt. As a result, the transfer agent’s review could become an additional closing workstream, and potentially a gating item, for private placements and other exempt offerings. Transaction parties may therefore need to engage the transfer agent earlier in a transaction’s lifecycle, agree the required documentary package before launch or pricing, and address issuance mechanics expressly in the closing checklist and transaction documents. Similar issues may arise outside conventional financings, including in connection with restricted equity compensation, stock consideration issued in private acquisitions, earnout shares, exercises or conversions of convertible securities, exchange offers, stock distributions, and other non-sale transfers. The breadth of the proposed rule may therefore require issuers to comply with additional transfer agent requirements and procedures across corporate, compensation and M&A workflows.

Market participants should therefore expect longer lead times for legend removals and for closings of unregistered issuances. Issuers may wish to refresh authorized representative lists, standardize legend removal packages and Rule 144 representation letters, and confirm the intended safe harbor path with their transfer agents. Because Rule 17ad-31 would impose a direct regulatory obligation on the transfer agent, issuer instructions and contractual indemnification would not substitute for its own determination. Nor would delivery of an opinion to the transaction parties necessarily compel the transfer agent to proceed. The transfer agent would retain responsibility for satisfying its own reasonable basis obligation and resolving any perceived red flags. Offering documents and closing arrangements may therefore need to include as an express condition to closing the transfer agent’s acceptance of the required legal analysis and readiness to issue or transfer the securities.

The SEC requests comment on the scope of the gatekeeping obligation, including whether original unregistered issuances belong in scope, whether red flags should be codified in the rule text, whether the opinion of counsel conditions are appropriate, and whether the (c)(3) self-determination alternative should be limited by size, resources, or expertise.

The required opinion under (c)(2) may also differ materially from opinions customarily delivered for legend removals in secondary transfers of securities and in capital markets transactions. The proposed safe harbor contemplates an analysis of the applicability and validity of a specific exemption, rather than a bare conclusion that registration is not required. Transfer agents may accordingly seek a more detailed reasoned opinion, additional factual certificates, or transaction-specific diligence. Market practice would need to determine whether customary closing opinions can satisfy that expectation or whether a separate transfer agent-facing opinion or memorandum becomes necessary.

Cost and Risk Allocation Implications

In addition, there are various secondary transactions that regularly occur without registration and without a specific safe harbor exemption from registration. In those cases, obtaining a legal opinion that satisfies the proposed requirements may not be possible. Furthermore, even if opinions on such transactions are delivered, transfer agents may be unwilling to rely on them based on the broader burdens imposed on them by Rule 17ad-31.     

These requirements could substantially increase the cost of US private share issuances and secondary transfers, as well as extend the time required to consummate those transactions. The allocation of risk over red flag determinations could also become highly contested if transfer agents seek to shift liability exposure to issuers and their outside counsel. Market participants may wish to address in comment letters whether the costs, delay, and other negative consequences of this framework are proportionate to its investor-protection objectives.

SEC Transfer Agent Oversight Authority

Commenters may also consider how the Proposal’s coverage of an expanded set of activities engaged in by registered transfer agents relates to the statutory definition on which the transfer agent rules rest. Section 3(a)(25) of the Exchange Act defines a “transfer agent” by reference to five enumerated functions performed as, or on behalf of, an issuer:

  • countersigning securities upon issuance
  • monitoring issuance to prevent unauthorized issuance (i.e., acting as registrar)
  • registering transfers
  • exchanging or converting securities
  • transferring record ownership by bookkeeping entry

Section 17A(d)(1) empowers the Commission to prescribe rules for registered transfer agents “engaging in any activity as transfer agents,” and the legislative history describes that authority as reaching “all aspects of a transfer agent’s activities as a transfer agent.” In other words, it is a broad but activity-specific grant of authority. Acting as an agent of an issuer is not the same as acting as a transfer agent.

The Proposal itself catalogs services that registered transfer agents provide to issuers well outside the statutorily enumerated functions, including proxy tabulation, strategic shareholder consulting, loyalty programs, corporate trust services, and class action administration. The Commission drew a similar line in its 2015 transfer agent concept release, noting that although it “regulate[s] transfer agents, which often serve as vote tabulators, it does not regulate the function of tabulating proxies by transfer agents.”

Proposed Rule 17ad-12 puts the question in concrete terms. It would require policies and procedures to mitigate material custody, operational, cybersecurity, and other risks “posed by or associated with the transfer agent’s business, activities, and operations,” while current Rule 17ad-12 reaches only funds and securities “related to its transfer agent activities.”

The Commission has raised a version of this question before. Request for Comment 125 of its 2015 transfer agent concept release observed that modern transfer agents “perform a wide array of services and functions that do not fall within the confines of Section 3(a)(25) and are not otherwise identified or contemplated in the existing transfer agent rules,” and asked whether the SEC “should update the transfer agent rules to address additional transfer agent services and functions that do not fall within the confines of Section 3(a)(25).”

The Commissioners Weigh In

All three commissioners voted in favor of the Proposal.

SEC Chairman Paul S. Atkins stated that the Proposal “would streamline and modernize the Commission’s rules to reflect transfer agents’ current processes and operations, including the use of electronic communications and blockchain technology in connection with securities offerings and the transfer of shares.”

Commissioner Hester M. Peirce remarked, “When the Commission first adopted the rules governing transfer agents, holding paper share certificates was the norm. Now few paper certificates exist, and transfer agents and other market participants are looking to a future in which many shares will be tokenized.” She anticipated public comment on various aspects of the Proposal to help the SEC craft a final rule that is “sufficiently flexible to accommodate future developments.”

Commissioner Mark T. Uyeda also highlighted the accelerating pace of technological innovation driving the need for updated transfer agent rules, noting that “Developments such as distributed ledger technology and tokenization, which were barely on the horizon in 2015, are now reshaping how transfer agents perform their core functions.” The Proposal, he stated, “reflect[s] the reality that the majority of securities transactions today occur electronically, rather than via physical exchange of certificates, and settle at T+1 or faster.”

In addition, Jamie Selway, Director of the SEC’s Division of Trading and Markets, observed that “As technology changes and the competitive marketplace evolves, good government requires revisiting legacy rules and regulations.”

Conclusion

The Proposal represents the SEC’s first comprehensive effort in nearly 50 years to align transfer agent regulation with the realities of modern securities markets and would dramatically expand their regulation. The Proposal’s restrictive legend provisions, in particular, seem likely to attract significant comment. The SEC acknowledged in its economic analysis that Rule 17ad-31 is likely to increase the cost to transfer agents of servicing certain issuers, may limit the transactions some transfer agents are willing to facilitate, and could accompany reductions in capital formation in some securities. Issuers, selling holders, and secondary market platforms, including those built around tokenized securities, have a direct interest in how the Commission ultimately calibrates these provisions.

The SEC included over 175 specific questions on all aspects of the Proposal. Stakeholders with views on the Proposal’s many open questions should engage in the comment process, which closes 60 days after publication in the Federal Register. The Proposal’s outcome will shape how the transfer agent industry evolves alongside the broader adoption of tokenized securities and distributed ledger technology in US capital markets.

Follow this and other critical developments on Latham’s US Crypto Policy Tracker.

  1. For example, the current definition of “master securityholder file” requires that the file for most types of securities be a single file with all identifying information for securityholders contained therein, which is incompatible with use of a public blockchain. Proposed Rule 17ad-9’s requirement that the transfer agent maintain “exclusive control” over the master securityholder file may still restrict the use of public blockchains, and we expect this provision to be the subject of comments. ↩︎
  2. We expect that commenters will note that proposed Rule 17ad-9’s requirement that the transfer agent maintain “exclusive control” over the master securityholder file may be inconsistent with the use of public blockchains as the primary file. ↩︎
  3. According to the Proposal, “[r]estricted securities…typically…bear restrictive legends indicating that their sale or transfer may be subject to a restriction or limitation and intermediaries will not effectuate their transfer until restrictive legends are removed.” ↩︎
  4. The SEC acknowledges that transfer agents relying on (c)(3) “could potentially use documentation provided by their issuer clients, which could mitigate the transfer agent’s costs.” ↩︎